CBRE Hotels has revised its 2024 outlook, citing a dip in lodging demand caused by weaker-than-expected leisure travel and slowing corporate profit growth. The company now forecasts a 1.2 percent increase in revenue per available room (RevPAR) growth for the year, down from the 2.0 percent projected in May 2024.
Slower Growth but Optimism Remains
Despite the revised forecast, CBRE anticipates a 2 percent year-over-year growth in RevPAR in the latter half of 2024. This is an improvement from the 0.5 percent growth observed in the first half, driven largely by international tourism and events related to the U.S. election.
ALSO SEE: Hotels' Price-Fixing Scandal: The Hidden Forces Behind Rising Room Rates
CBRE projects a 2.3 percent growth in GDP and an average inflation rate of 3.2 percent for 2024. The performance of the lodging industry is closely linked to the overall strength of the economy, with a strong correlation typically observed between GDP and RevPAR growth.
Challenges and Potential Risks
According to Rachael Rothman, CBRE’s head of hotel research and data analytics, the near-term outlook for RevPAR is modest, with single-digit growth expected. Factors such as election-related events, a rise in international travel, and a potentially lower interest rate environment are expected to support hotel demand.
However, challenges remain. Weaker consumer spending, increased competition from short-term rentals, cruise lines, and other lodging alternatives pose potential risks to growth. Despite these concerns, CBRE is optimistic that RevPAR will hit a nominal record of $100.54 in 2024, representing 114.5 percent of pre-pandemic levels in 2019.
Economic Slowdown on the Horizon?
Michael Nhu, CBRE’s senior economist and head of global hotels forecasting, noted that following stronger-than-expected GDP growth in the second quarter, a slowdown is anticipated in the second half of 2024 and into 2025. If interest rate cuts fail to stimulate economic growth, a decline in RevPAR may occur.
Nevertheless, demand for travel remains robust, as evidenced by a record year-to-date Transportation Security Administration (TSA) throughput in the U.S. of nearly 549 million passengers, a 5.4 percent increase year-over-year.
International Tourism: A Key Driver in 2024
International tourism is expected to be a significant factor in the U.S. hotel industry's performance in the latter half of 2024. As global travel restrictions continue to ease, the influx of international travelers could help offset domestic weaknesses. CBRE highlights the potential for higher spending from these visitors, especially in key tourist destinations and major cities.
Technology and Sustainability Trends in the Hotel Industry
In addition to economic factors, the adoption of technology and sustainability initiatives is shaping the future of the hotel industry. CBRE notes that hotels investing in digital transformation, such as contactless check-ins and enhanced guest experiences, are likely to see stronger demand. Moreover, sustainability practices, including energy efficiency and waste reduction, are becoming increasingly important to travelers, potentially influencing hotel choices and overall industry performance.
Long-Term Outlook
Looking further ahead, CBRE expects increasing global wealth and muted supply growth to bolster lodging fundamentals over the long term. The company forecasts compound annual growth in supply of under 1 percent over the next three years, as elevated financing and construction costs are likely to temper new construction activity.
Despite the potential challenges, CBRE remains cautiously optimistic about the future of the U.S. lodging industry as it navigates an evolving economic landscape.
Source: Hotel Management